Farsighted free trade networks |
| |
Authors: | Jin Zhang Licun Xue Lei Zu |
| |
Institution: | 1. Department of Economics, University of International Business and Economics, 10 East Huixin Street, Chaoyang District, Beijing, China 2. Department of Economics, McGill University, 855 Sherbrooke Street West, Montreal, QC, Canada 3. School of Management Science and Engineering, Central University of Finance and Economics, Beijing, China
|
| |
Abstract: | The paper examines whether bilateral free trade agreements can lead to global free trade. We reconsider the endogenous tariff model introduced by Goyal and Joshi (2006) who study pairwise stability of free trade networks. We depart from their analysis by adopting the concept of pairwise farsightedly stable networks (Herings et al. 2009, GEB). We show that the complete network (i.e., global free trade) constitutes a pairwise farsightedly stable set. In particular, there is a farsightedly improving path from the empty network (i.e., no free trade agreement in place) to the complete network, which involves link additions only, while farsightedly improving paths from preexisting free trade networks may involve link deletion (i.e., dissolution of some bilateral FTAs). Moreover, we show that pairwise farsightedly stable set of networks is not unique. One implication of our results is that bilateral trade negotiations, if properly channeled, can lead to global free trade, although some bilateral agreements may have to be dissolved first to pave the way towards global free trade. |
| |
Keywords: | |
本文献已被 SpringerLink 等数据库收录! |
|